Volatility & Gold - Relationship Fallout

Historically, the relationship between volatility and gold has been consistent and on the same side. If the volatility index rises, so does the price of gold and vice versa. This relationship, like many others, seems to have fallen out, especially over the past two years. Currently, volatility is facing new lows as gold faces new highs. Will this fallout reverse and cause pain for investors? 

In 2025 itself, gold prices are up by 37% whereas VIX peak rise was 352% but currently it is 12% down for the year. The next four months are crucial as the impact of tariffs on inflation, employment locally and globally gets revealed in the data. In addition to this, the legal status of the tariff is upheld through the Supreme Court. 

All these events, along with the high uncertainty of any new disturbance during peak sales season, might impact non-tech company earnings. Given high inventory buildup, if sales do not go as planned, then next year will be a concerning one. 

The results and actual impact of these events might force either gold or VIX to catch up with the other by year-end or in the first half of next year. Given that the majority of investors are fully invested in equity and heavily invested in gold. A worst-case scenario unfolding would create painful times ahead for all stakeholders.